[Madison, Wis…] Wisconsin’s Unfair Sales Act, also known as the minimum markup law, will finally get the public scrutiny its opponents have long sought.

The Wisconsin Institute for Law and Liberty (WILL) is challenging the constitutionality of the Great Depression-era law on behalf of two plaintiffs. WILL filed the lawsuit Monday in Vilas County.

The law requires that alcohol, tobacco, and motor fuel are marked up 3 percent at the wholesale level, 6 percent at the retail level for alcohol and tobacco, and 9.18 percent at the retail level for motor fuel. It also forbids retailers from selling most other products below cost.

“The state of Wisconsin should have to come into court, and it should have to explain why it is reasonable to believe that this law, which prevents business and consumers from entering into low-cost transactions, serves some purpose other than the protection of politically-favored competitors,” said WILL president and general counsel Rick Esenberg on a conference call with the media.

“We believe that the minimum markup law does not have a plausible justification,” said Esenberg.

One plaintiff is Krist Oil, a family-owned, Michigan-based gasoline retailer with 72 locations in northern and northeastern Wisconsin. The company is able to offer discounts to its customers in Michigan, which does not control the prices that it can charge. But the prices Krist can charge in Wisconsin are strictly regulated by the minimum markup law.

A second plaintiff is Robert Lotto, a Green Bay resident. Lotto contends he is harmed by the Wisconsin law since it requires him to pay a price for gasoline that is higher than what the competitive price would be if the minimum markup law were not in place.

The focus of the lawsuit is that the minimum markup law restricts the economic liberty of Krist and Lotto and their right to earn a living under the Wisconsin Constitution without any compelling governmental interest.

Opponents of the law also contend it is crony capitalism and protects established interests.

“We have a small group of people who are intensely interested in the law. If you are a business person who is being protected by that, you have a very intense interest, and crony capitalists are very good at working the legislature to get what they want,” Esenberg said.

Many Wisconsinites don’t even know that the state has a minimum markup law, Esenberg added.

Proponents of the law claim it protects small mom-and-pop businesses, but Esenberg disagreed. “I think the notion that small businesses can’t compete is overstated.” He added: “It’s not the job of the legislature to pick winners and losers” as sympathetic as their cases may be.

In addition, predatory pricing is already prohibited by both federal law and state statutes.

The minimum markup law first came to the attention of many when Meijer – a Michigan-based supermarket chain that sells groceries, clothing, televisions and sporting goods – entered the Wisconsin market last year. The company drew complaints from competitors for offering discounts that were illegal under the law.

Last legislative session, Sen. Leah Vukmir (R-Wauwatosa) and Rep. Jim Ott (R-Mequon) introduced a bill that would eliminate the Unfair Sales Act. “It is not the fundamental role of government to impose an artificial price on consumer goods,” Vukmir told the MacIver Institute last year. “The minimum markup is an outdated practice, an unnecessary intrusion into the private sector and the free market. I strongly support the repeal of the law.”

Unfortunately, the repeal bill did not receive even a public hearing in either house of the legislature.

Even though legislators have refused to act, a recent poll shows that Wisconsinites are tired of paying higher prices and want the law repealed. In that poll, 56 percent of likely voters in Wisconsin supported repealing the state’s minimum markup law. Support increased to 76 percent when the voters learned more about the law.

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MI President Brett Healy

Brett Healy is the President of the John K. MacIver Institute for Public Policy, a Wisconsin-based think tank that promotes free markets, individual freedom, personal responsibility and limited government.